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General News of Thursday, 9 August 2007

Source: GYE NYAME CONCORD

Minister's lies, Dodgy Loan Agreement & Prairie Texas

MURKY DETAILS EMERGE OVER QUALITY GRAIN (2)

Gye Nyame Concord’s continuing probe into Government’s sale of majority shares in the Aveyime Rice Project to Messrs Prairie Texas Inc. to reactivate the defunct Quality Grain Rice Company located in the North and South Tongu districts of the Volta Region is churning out more interesting revelations made up of ministerial lies, cover-ups and total deception.

What is also emerging is a case where the government varied its own bid requirements on the three bids it asked the bidding companies to submit without adequately informing some of the companies of the change before awarding the rice project on the varied terms to Prairie Texas.

In the final letter to the two frontline bidders, Messrs Integrated Rice Company Ltd and Messrs Prairie Texas Inc dated on 16th February, 2007, the Chief Director of the Ministry of Food and Agriculture, Mr Giyele Nurah, on behalf of the sector Minister, Mr Ernest Debrah, gave the two companies three scenarios on which to submit their bids for consideration.

The companies were also required to prepare bids for three scenarios on their detailed financial proposals.

In the first scenario, the two companies were required to submit proposals where the whole project, including all machinery, will be given outright to the strategic investor for a 50-year lease on the 2,100 acre land.

In the second scenario, the companies were to submit proposals on a public private partnership agreement where the strategic investor will partner Government to run the whole project on a 49/51 percent shares basis, with 49 percent going for the investor and 51 percent for Government.

The third scenario, according to our investigations, required the two companies to bring proposals on another public private partnership arrangement where Government and the strategic investor will jointly run the mill on a 51/49 percent shares respectively, on condition that the production of paddy will be left in the hands of the private partner.

However, the MOU entered by the Government of Ghana (GoG) and Prairie for the running of the Aveyime Rice Project, involving a Joint Venture (JV) arrangement, is a far departure from the required bid proposals.

Under the strangely new shareholding arrangement on the JV, Government received 30 percent shares; 19 percent fewer shares than the minimum it was billed to get under the three proposals it asked for, and 22 percent less than the majority shares proposed in all three bids. Prairie, which was billed to get a minimum 49 percent shares, and a maximum 52 percent shares under all three original bid proposals, ended up with a whopping 70 percent; an increase of the 19-22 shares struck off government’s original shares.

And Prairie got all these for a deal that could see any amateur businessman laughing all the way to the bank.

With its 70 percent ownership of the JV, Prairie is required to contribute to a capitalization of $3,571,429 equity to be contributed by the GoG and itself in proportion to their respective shareholdings as follows:

Government of Ghana (GoG) - $1,071,429

Prairie Texas Inc. - $2,500,000.

But documents sighted by this paper shows that GoG's contribution to the deal is far in excess of the value of the deal itself.

GYE NYAME CONCORD can reveal that the GOG’s contribution to the project through the value of the assets – minus the land - of the Quality Grains Company amounts to $8,145,336.

In a move aimed at reducing the significance of this misnomer, the difference between GoG's total contribution of $8,145,336 and its capital contribution of $1,071,429, amounting to $7,073,908, is expected to be loaned to the Joint Venture Company, 70% of which is owned by the US-registered Prairie Texas Inc., under a loan agreement between the parties.

But the most worrying aspect of the loan agreement is the terms under which it was signed. Under the deal, Prairie insisted and got away with an offer to pay the loan on an annual interest rate of 8% over a 12-year-period with a 2-year moratorium, on an annual debt servicing not more than 15% of the project’s previous year’s net profit.

But the snag, under the loan agreement, is that, if the JV coy fails to pay the loan over the 12-year period, the contract stipulates that the balance will not be paid.

In simple term, if the JV refuses to pay the loan within the stipulated 12-year period, the loan will be cancelled even before the 2-year moratorium on the 12-year loan repayment period expires.

And for all these sweet offers, all Prairie is expected to contribute under the deal before taking over the company’s management is a $2,500,000 cash injection to be paid before the deal, or a commitment made 30 days after the signing of the MoU that it would pay the $2,500,000.

Significantly, the commitment to pay in 30 day was made on 16th May, 2007 and has elapsed at the moment, though it is unclear whether they have paid the amount.

More anon.

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